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Speaker 1: Ray Dalio, founder of Bridgewater Associates. Right, you see the

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Speaker 1: world very clearly.

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Speaker 2: You write about the.

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Speaker 1: World, You understand some of the forces at play, and

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Speaker 1: the way you view the world is. At the moment,

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Speaker 1: it's probably volatile, but there are five forces at play,

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Speaker 1: and one of them is politics, which Secretary Kerry was

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Speaker 1: talking about. Can you talk about those five forces and

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Speaker 1: whether you worry that they're getting even harder to control?

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Speaker 2: Thank you for the question.

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Speaker 3: Heah for the last fifty years been a practical global

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Speaker 3: macro investor, and some of the things that I learned

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Speaker 3: along the way was that things that surprised me often

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Speaker 3: never happened to me in my lifetime, but happened in history.

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Speaker 3: And there were three big forces that led me to

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Speaker 3: study the last five hundred years of history and the

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Speaker 3: patterns of history. And those three forces were the amount

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Speaker 3: of debt that we're creating the governments particularly, and the

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Speaker 3: amount of money printing and so on to finance that day.

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Speaker 3: It's unprecedented other than if you went back to the

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Speaker 3: nineteen thirty to forty five period. The second is the

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Speaker 3: internal divisions, the largest wealth gaps and values gaps that

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Speaker 3: are leading to populism of the left and populism of

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Speaker 3: the right, which a populist is an individual who will

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Speaker 3: fight and win at all costs for that side. It's

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Speaker 3: a threat to the system. And so we have our

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Speaker 3: political that is totally different.

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Speaker 2: Than at any time in my lifetime.

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Speaker 3: And the third is the geopolitical, the Great Power conflict.

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Speaker 3: Nineteen forty five, we began the new world order. And

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Speaker 3: this pattern always happens. You have a war, the winners

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Speaker 3: of the war set the rules. The United States had

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Speaker 3: half the world economy, ninety percent of world's moneyment all

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Speaker 3: the and so the world order is changing competitions, different sides,

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Speaker 3: more risk for conflict. So then when I studied history,

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Speaker 3: I found that the fourth influence, and I'm just in

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Speaker 3: no particular order listening to them. The fourth influence was droughts, floods,

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Speaker 3: and pandemics that has actually killed more people and has

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Speaker 3: had a bigger effect in toppling orders, domestic orders and

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Speaker 3: world orders.

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Speaker 2: Than the first three of those.

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Speaker 3: And then number four, number five is technology. Throughout history,

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Speaker 3: man's inventiveness and the development of technology, and I saw

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Speaker 3: how they are interrelated in creating these cycles, these big cycles.

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Speaker 3: Because if you have if you spend more money than

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Speaker 3: you earn and you get into debt. That money issue matters,

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Speaker 3: and that's certainly the case now, and then as we

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Speaker 3: look at the next year, certainly populism and most importantly,

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Speaker 3: perhaps even the threat to our ability to make decisions together,

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Speaker 3: as Secretary Kerry referred to, that political issue is of

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Speaker 3: paramount importance. Number three certainly the geopolitical and as we're

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Speaker 3: dealing with the climate issue, I mean, never in our

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Speaker 3: lifetimes have we had a bigger decision pertaining to climate

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Speaker 3: and its consequences.

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Speaker 2: And then, of course technology.

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Speaker 1: You're quite you could be quite positive on technology. The

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Speaker 1: other four are getting worse. Have we ever seen a

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Speaker 1: more uncertain time for our livelihoods?

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Speaker 2: Not in our lifetimes.

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Speaker 3: This is analogous to the nineteen twenty excuse me, nineteen

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Speaker 3: thirty to forty five period, and in other periods of

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Speaker 3: time when there's a confluence of these because let's think,

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Speaker 3: for example, on the climate issue, it's estimated that between

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Speaker 3: five and ten trillion dollars a year is one way

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Speaker 3: or another, no matter. If you neglect it, you'll pay

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Speaker 3: the price. If you don't neglect it, you'll have the

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Speaker 3: cost either way. It's going to be five to ten

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Speaker 3: trillion dollars a year. That's world GDP is one hundred

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Speaker 3: trillion dollars, So it's like it's expensive, and so we

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Speaker 3: are living in a world that really doesn't have enough money.

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Speaker 3: So even if we're fiddling around with like how's this

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Speaker 3: going to work? From the money point of view, you

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Speaker 3: have to look at who has the money and what

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Speaker 3: are their motivations. If you want to talk about that,

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Speaker 3: we can, but there's a big money issue here. Money

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Speaker 3: represents productivity. It's a proxy for productivity.

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Speaker 1: So who does have the money and what is their motivation?

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Speaker 2: Okay, I'm going to start with.

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Speaker 3: The multilateral Development banks have about two trillion, and they

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Speaker 3: have responsibility. So in other words, the IMF, the World Bank,

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Speaker 3: and so on have about two trillion. That's how much

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Speaker 3: they have, and we have to spend five to ten

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Speaker 3: trillion a year. Philanthropists have about a trillion a year worldwide,

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Speaker 3: about five hundred in the United States.

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Speaker 2: Not much. You're dropping the bucket.

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Speaker 3: The biggest pool of money is large institutional money about

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Speaker 3: two hundred trillion.

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Speaker 2: That's the big pot of money right now.

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Speaker 3: About zero point three percent of that money goes into

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Speaker 3: climate and also the various forms of let's say ecological

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Speaker 3: or investments of that sort. Only about point three. I

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Speaker 3: know those people. I know the circumstances I don't want.

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Speaker 3: Everybody has to take care of the money's for taking

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Speaker 3: care of who the money is to take care of,

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Speaker 3: and so they have to have a return on that money.

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Speaker 3: And there's a great possibility to make great money go

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Speaker 3: into these initiatives if they can make it profitable. Profit

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Speaker 3: is a proxy for product. And one of the great

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Speaker 3: things about this conference that probably people really don't have

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Speaker 3: a good sense for that. I was lucky to have

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Speaker 3: a good sense for because of some of the things

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Speaker 3: I do mention in oceans and so on. Is there

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Speaker 3: are so many deals going on, we're at a turning point.

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Speaker 3: But the answer is you have to make it profitable.

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Speaker 3: You just can't say it's a good thing, go do it.

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Speaker 3: Regulations matter, of course, there are other things that politics

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Speaker 3: matter a lot.

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Speaker 2: But in order to really turn.

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Speaker 3: It loose, it's the creativity that then gets reinforced because

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Speaker 3: there has to be a financial sustainability, just like there

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Speaker 3: has to be an ecological statement.

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Speaker 1: But if we go back to the five forces, so

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Speaker 1: which one of them which one is actually the one

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Speaker 1: that holds back investors. We saw the Inflation Reduction Act,

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Speaker 1: which means that some of these prices for technologies going

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Speaker 1: down easier to make a profit if you invest it

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Speaker 1: in the right project.

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Speaker 3: It's the profit, it's the money thing, if it is

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Speaker 3: the biggest influence we're right now. Let's say what build

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Speaker 3: Gates is doing with Breakthrough Energy. That's such a good

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Speaker 3: example of a double bottom line. You need double bottom line,

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Speaker 3: and that's why some of these deals that are happening

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Speaker 3: that will never make the headlines. There's eighty thousand people

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Speaker 3: here or so, and there's so many deals that are

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Speaker 3: going on. Those are very very powerful.

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Speaker 1: We heard this announcement of ALTERRA. I mean, that's a

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Speaker 1: lot of money from the UAE going to funds in Brookfield.

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Speaker 1: Is that a template of how money can be translated

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Speaker 1: to projects that need it.

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Speaker 3: It's a wonderful tenplate and now that has to be

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Speaker 3: converted into profits. But there's so much inventiveness that's happening

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Speaker 3: now that I think that that's where the big the

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Speaker 3: biggest change.

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Speaker 2: Of course, there are questions.

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Speaker 3: There are questions like you could put on a carbon tax,

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Speaker 3: or you can reduce subsidies for carbon, but those are

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Speaker 3: politically problem so that we've got a politics issue too.

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Speaker 3: So I think if you're going to make that move,

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Speaker 3: I think that the other aspect of it is, let's

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Speaker 3: be realistic. We are unlikely to achieve the one point

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Speaker 3: five target. So there are three things what you can

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Speaker 3: do to achieve the one point five target. The second

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Speaker 3: is adaptation. Okay, if you don't achieve the one point

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Speaker 3: five target, what needs to be done to make that acceptable?

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Speaker 3: Of course, the consequences of the of not doing that

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Speaker 3: are big, big migration, all sorts of problems. But how

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Speaker 3: do you adapt? And then the third cost is the

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Speaker 3: cost of the damage. I believe that more we're going

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Speaker 3: to be moved in an economic way to adaptation, and

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Speaker 3: that there's a lot of that don't have a great power,

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Speaker 3: and the reason is it affects everybody. So whereas there's

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Speaker 3: an element here of let's be good and get the money.

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Speaker 3: But if you go to let's say banks, they say

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Speaker 3: banks have a lot of money, but banks have assets

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Speaker 3: and liabilities, and if they don't receive or give their

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Speaker 3: depositors or those who are putting money with them an

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Speaker 3: adequate amount of return, they won't have any money, so

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Speaker 3: you still have to have the return component of that.

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Speaker 3: What happens is self interest is a great motivator when

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Speaker 3: you have that, and I think adaptation will be some

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Speaker 3: area for probably great investment and great productivity.

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Speaker 2: But is in.

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Speaker 1: Climate change the biggest risk really to any company? And

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Speaker 1: so when does it actually when do we see regulation

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Speaker 1: that forces every company to look at it as the

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Speaker 1: longest biggest risk outs Well.

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Speaker 3: I think Secretary carry did such a wonderful job of

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Speaker 3: describing the realities of that.

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Speaker 2: I mean, I think that's the balance.

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Speaker 3: And so as a very practical person, one can't say

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Speaker 3: it's going to be all or none.

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Speaker 2: One has to look at actually what is it? What

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Speaker 2: is happening?

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Speaker 3: And I think as you're dealing with the regulation, that's right,

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Speaker 3: that's good. And then there's also a mean developing that

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Speaker 3: you're not a good citizen. Okay, that political aspect also

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Speaker 3: plays I mean, I mean social aspect, mean plays a role.

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Speaker 3: Are you doing it well? Is a social pressure that

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Speaker 3: has a role. So there's regulation, there's social pressure. Those

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Speaker 3: are all good things that are helping. The real question

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Speaker 3: is that enough? I mean, it's not like you have

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Speaker 3: them where you don't have them.

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Speaker 1: And we also have central banks that have gone from

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Speaker 1: zero interest rates to five percent. So does that make

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Speaker 1: a lot of these projects will be more difficult to

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Speaker 1: get off the ground because you can't issue debt to

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Speaker 1: finance projects that are needed in climate.

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Speaker 2: But it's a reality.

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Speaker 3: We have to deal with the intersection of the various realities.

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Speaker 2: Right.

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Speaker 3: So let's say from a central bank point of view,

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Speaker 3: what they did was they gave away money. They made

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Speaker 3: interest rates more negative, and you didn't have to pay

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Speaker 3: back principle because they had interest only loans, So you

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Speaker 3: got money. And then but the problem is one man's

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Speaker 3: debt is another man's assets. And if you don't create

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Speaker 3: an asset that is going to give you a return

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Speaker 3: that's above inflation, you create a skew. So everybody borrowed

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Speaker 3: a lot of money.

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Speaker 2: That is a problem.

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Speaker 3: Okay, So when we're dealing with the other question, is

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Speaker 3: it more difficult to finance now that you might have

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Speaker 3: an eight percent essentially cost of funds rather than free money?

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Speaker 2: Yes, it is, So what are you going to do

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Speaker 2: about it?

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Speaker 3: You can't not take care of the fact that you

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Speaker 3: need to give them a real return. Otherwise you create

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Speaker 3: this bubble that will blow up, and the debt. Sure,

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Speaker 3: we could produce a lot more debt.

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Speaker 2: The government.

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Speaker 3: We can say the government can give us money. Okay,

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Speaker 3: everybody says the government should give us money or protect risks,

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Speaker 3: but their.

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Speaker 2: Costs to that. So these all have to interact.

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Speaker 3: You're optimizing for all the parts of this, you know,

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Speaker 3: the machine.

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Speaker 1: I can't tell whether you're optimistic or pessimistic about climate finance.

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Speaker 1: I mean, when are we.

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Speaker 2: Going to semalistic and practical? I hope?

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Speaker 1: Okay, So how quickly can we see real returns for

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Speaker 1: investors to make a real difference.

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Speaker 3: I think the Bungos you're going to see a very

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Speaker 3: rapid growth in profitable in all sorts of forms. And however,

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Speaker 3: I think it'll fall there. It'll come too late, too

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Speaker 3: small to be the solution to that. So I think

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Speaker 3: when we look at the whole climate, the whole thing,

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Speaker 3: I think this cop is going to produce two or

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Speaker 3: three times more than any cops produced, and I think

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Speaker 3: we're going to also walk away that it's only a

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Speaker 3: third of what we need to produce in order to

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Speaker 3: deal with that issue. And that's just the reality. So

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Speaker 3: it's like the glass that's you know, one third full

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Speaker 3: or a half full.

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Speaker 2: You know, we're going to.

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Speaker 3: Look at it and it's going to say is it

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Speaker 3: a success or a failure? It depends on what you're

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Speaker 3: looking at. A lot of great stuff is happening in

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Speaker 3: terms of having impact, but is it enough?

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Speaker 2: No, it's not enough.

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Speaker 1: Is the US election next year the most important thing

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Speaker 1: for climate change?

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Speaker 2: It's the most important thing for the world.

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Speaker 3: Probably, Okay, because for climate change, of course it hasn't.

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Speaker 3: I think Cherry said very well, there's a world movement,

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Speaker 3: but US leadership and US policy and trade and cooperation

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Speaker 3: is fundamental for climate and it's fundamental for a world

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Speaker 3: that works well. And we have really a choice about that.

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Speaker 3: So there are going to be issues regarding cooperation. For example,

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Speaker 3: I think Donald Trump's position is that we will have

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Speaker 3: tariffs of about ten percent across the board imports. Okay,

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Speaker 3: so we'll become that others will respond with similar things.

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Speaker 3: That makes more of a trade war. And then when

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Speaker 3: you have the trade war, you have more capital wars,

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Speaker 3: and you have less cooperation as you have.

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Speaker 2: Not a policy.

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Speaker 3: You know, that is a policy of you know, make America,

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Speaker 3: focus on America, making it great as strong as he

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Speaker 3: would say. Okay, you have that not lending itself to

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Speaker 3: as much the common interests in the common cooperation. So

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Speaker 3: you have a world government that works more like the

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Speaker 3: US government world works now or doesn't work.

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Speaker 1: So how do you see it playing out?

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Speaker 2: Is it too soon?

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Speaker 3: I think a lot will have to do with the primaries. Okay,

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Speaker 3: so we'll go through the politics. The game plan of

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Speaker 3: Republicans who don't want Donald Trump to be elected is

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Speaker 3: that there'll be the three primaries or the Iowa caucuses,

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Speaker 3: New Hampshire, and then South Carolina, and the candidates who

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Speaker 3: were not number one opponent of them should drop out,

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Speaker 3: and then there'll be one candidate. I would say it

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Speaker 3: looks like most likely Nicky Haley. Nicky Helly is somebody

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Speaker 3: who I think you have to work according across party lines.

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Speaker 3: You have to be smart, you have to work across

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Speaker 3: party lines. I'm in favor of a system that has

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Speaker 3: those type of people on both sides. I think you

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Speaker 3: need a strong middle, and that strong middle of those

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Speaker 3: who can work across party lines also has to have reforms.

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Speaker 3: There need to be a lot of reforms that take

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Speaker 3: place that make the country be able to deal with

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Speaker 3: its challenges and do well. And so the primary, I

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Speaker 3: think the primary, who gets the nomination is going to

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Speaker 3: be the most important election. And if that, if you

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Speaker 3: get an opponent, let's say, whoever that opponent would be,

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Speaker 3: Let's say Nikki Heley by way of example.

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Speaker 2: That affects the.

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Speaker 3: Democratic side because there's a question most Americans don't want

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Speaker 3: a Biden Trump election, and most of them don't want

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Speaker 3: either for each their various reasons. There are reasons of

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Speaker 3: age and some one that enter into that, and so

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Speaker 3: there's even consideration within the Democratic Party will that happen

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Speaker 3: or well alone, it's likely that if that alternative, let's

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Speaker 3: say Snicky Haley was to run, it would be likely

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Speaker 3: that you would win the presidential election.

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Speaker 2: That's what the polls would show.

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Speaker 3: That puts the Democrats in a position where, okay, now

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Speaker 3: the choice becomes a little bit more difficult. So the

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Speaker 3: question of who is running against whom in the election

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Speaker 3: also carries forward to whether you have a system that

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Speaker 3: works well, because if you have the polarity of the extreme,

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Speaker 3: neither side can win. There will not be an acceptance

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Speaker 3: of some of the policies. The policies even include how

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Speaker 3: opposition is being dealt with so that you have irreconcilable differences. So, yes,

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Speaker 3: the election is going to be critically important for not

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Speaker 3: just the United States, for the world.

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Speaker 1: And what will the American economy look like, I'm sorry,

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Speaker 1: what will the American economy look like when people go

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Speaker 1: to the votes.

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Speaker 2: Well, they'll be it's a very.

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Speaker 3: The American economy will be softening, okay, because what kept

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Speaker 3: it with relatively strong is there was a big transfer

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Speaker 3: of wealth from the government. The government got much more

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Speaker 3: in debt. Central banks uh printed bought the debt by

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Speaker 3: printing money.

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Speaker 2: We had an inflation piece.

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Speaker 3: They put out more money, about twice as much money

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Speaker 3: as was necessary to compensate for the COVID losses. So

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Speaker 3: a lot of everybody got a lot of money, and

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Speaker 3: the government got a lot into debt that is now

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Speaker 3: going down, and the household and business sectors balance sheets

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Speaker 3: and income statements are relatively good. But at the same

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Speaker 3: time as that goes down, then you're having also the

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Speaker 3: debt mature and rollover. So higher interest rates enter into

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Speaker 3: the picture of what a new funding is. And you

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Speaker 3: referred to it earlier in your question. You, oh, at

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Speaker 3: this interest rate, it's a whole different story, and all

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Speaker 3: of that is favoring then the weakening of the economy.

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Speaker 3: I don't think there's going to be a big bust

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Speaker 3: or anything. They're not financial crisis, but it's not going

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Speaker 3: to be a strong economy. And a lot holse to

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Speaker 3: do with also the supplied demand of bonds, which is

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Speaker 3: a whole other subject. So I would expect that there's

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Speaker 3: going to be I don't think there's going to be

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Speaker 3: economic happiness. And because there's not going to be economic happiness,

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Speaker 3: as that plays a role on the election, it will

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Speaker 3: mean that the party in power is going to have

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Speaker 3: more challenges. Plus, at the same time, there is the

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Speaker 3: age question and you know things you know, and then

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Speaker 3: the succession to President Biden and that issue and who's

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Speaker 3: going to choose the successor. Is that going to be

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Speaker 3: the public or is that going to be Biden? And

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Speaker 3: all of those issues come together to make an interesting election.

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Speaker 1: So it certainly will. We're almost out of time. But

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Speaker 1: what does that mean for raising finance for climate projects?

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Speaker 3: If the entrepreneurship is good, and it really is good,

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Speaker 3: as I said earlier, you're going to see a lot more,

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Speaker 3: but it's going to be difficult and it will not

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Speaker 3: be the game changer, right Dally

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Speaker 1: Thank you so much for joining us.